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Money demand and disinflation in selected CEECs during the accession to the EU

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  • Jarko Fidrmuc

Abstract

A panel data set for six countries (Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) is used to estimate money demand with panel cointegration methods over the recent disinflation period. The basic money demand model is able to convincingly explain the long-run dynamics of M2 in the selected countries. However, money demand is found to have been significantly determined by the euro area interest rates and the exchange rate against the euro, which indicates possible instability of money demand functions in the Central and Eastern European countries. Therefore, direct inflation targeting is an appropriate monetary regime before the eventual adoption of the euro.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 41 (2009)
Issue (Month): 10 ()
Pages: 1259-1267

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Handle: RePEc:taf:applec:v:41:y:2009:i:10:p:1259-1267

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Cited by:
  1. Saten Kumar & Mamta B. Chowdhury & B. Bhaskara Rao, 2013. "Demand for money in the selected OECD countries: a time series panel data approach and structural breaks," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(14), pages 1767-1776, May.
  2. M. Frömmel & G. Garabedian & F. Schobert, 2009. "Monetary Policy Rules in Central and Eastern European Countries: Does the Exchange Rate Matter?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 09/611, Ghent University, Faculty of Economics and Business Administration.
  3. Frauke Dobnik, 2013. "Long-run money demand in OECD countries: what role do common factors play?," Empirical Economics, Springer, vol. 45(1), pages 89-113, August.
  4. Roman Horvath & Lubos Komarek & Filip Rozsypal, 2010. "Does Money Help Predict Inflation? An Empirical Assessment for Central Europe," Working Papers 2010/05, Czech National Bank, Research Department.
  5. Ruxanda, Gheorghe & Botezatu, Andreea, 2008. "Spurious Regression And Cointegration. Numerical Example: Romania’S M2 Money Demand," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 5(3), pages 51-62, September.
  6. Frauke Dobnik, 2011. "OLong-run Money Demand in OECD Countries – Cross-Member Cointegration," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0237, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. Evžen Koèenda & Tigran Poghosyan, 2010. "Exchange Rate Risk in Central European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 60(1), pages 22-39, February.

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